Cronyism, State by State

I get sent a lot of infographics and I generally just delete them but I thought this one was pretty good.  The largest recipients of corporate welfare from state governments.  Perhaps appropriately given the tilt of our economy here, our largest recipient in AZ is a real estate developer.

click to enlarge

  • TruthisaPeskyThing

    At first I was shocked, but the #s may be a bit misleading. For example, Ford received 2.2 blink over years on tax breaks, etc. over 38 years. That is 58 million per year. Certainly more than I am getting, but perhaps a lot more is expected of Ford, and let us keep things in perspective. In fact, per employee, Ford may be getting fewer Trac breaks than I am getting. :-) I agree cronyism is a problem, but I am not sure that this graphic is the best illustration of the problem.

  • Nimrod

    I'm with you on this. It seems like another one of these summary graphics that can be misleading due to oversimplification and lack of adequate comparison.

  • Tom Lindmark

    I checked out Klutznick and they actually only have two projects in AZ. Desert Ridge and CityNorth. As I'm sure you recall, CityNorth was the subject of a legal debate over the construction of a city owned parking garage. That may be what's driving the data regarding the size of their subsidies.

    Really, it's not so much the one off deals like Klutznick that are irritating so much as the death by a thousands bites which results from the spread of corporate welfare. For example, your much loved light rail is corporate welfare spread large.

  • Tom Donahue

    I think the better argument is that a reduction in corporate taxes is never a subsidy, or "welfare."

    Corporate taxes (other than perhaps some local real estate taxes to account for local services) are really nothing more than a way to hide the tax burden and size of government from the average sucker. A corporation can't go out and enjoy the money, only its employees and shareholders can enjoy the money, and taxing it at the corporate level just takes it away from the shareholders. What the average sucker doesn't realize, intent as they are on demagoging the occasional rich guy, is that a lot of those shareholders are in fact them, whether through whole life insurance policies, pension funds, or other retirement plans. If they had to pay those taxes directly we'd start to get a lot smaller government.

  • Mike Powers

    Exactly what I was wondering. What are the subsidies compared to the firm's overall sales?

  • TruthisaPeskyThing

    Yes. I think there is a difference between giving a tax break that might be available to many job providers VS giving targeted grants or loans that often are not paid back.

  • marque2

    One point not mentioned, what is the scale of the subsidies. If a state is generally against subsidies, they will still have a company with, highest subsidies, but those subsidies would be quite low. On the other hand, Connecticut is owned by UTC.

  • Tom Donahue

    Actually, you raise another good point. Not only do corporate taxes hid the tax burden from the people who pay for government, it gives huge opportunities for government to play favorites. Eliminate the taxes and eliminate the graft.

  • TruthisaPeskyThing

    Yes. Government control opens door for much graft. Consider student loans . . . the government has taken over the program and now it is a way to buy votes. Government constructs dams and prohibits the benefit from those dams from going to households served by private utilities. The government takes over 2 car companies and within months claims that competitors tot its car companies have faulty accelerators. Of course, the list goes on and on.

  • markm

    The problem is the tax breaks this lists are awarded by legislators to a particular company rather than a tax cut available to all companies. It's not exactly "I'll take your money and buy his vote or campaign contributions", but it is, "I'll take your money, but give him a break in return for votes and campaign contributions." In the long run, that means tax rates on those not politically favored have to rise, so it works out the same.

    Even when this deal isn't corrupt, it's still politicians with little understanding of the business picking winners and losers, which usually ends in either a defunct business and wasted money, or in one company getting an unfair advantage over it's competition. In west Michigan, over the last 6 years I've seen several startup businesses that were picked by politicians for special breaks sink out of sight; two of them were customers.

    The first was going to produce electronic engine control (electronic ignition and fuel injection) modules for scooters and small motorbikes with one-cylinder engines, which were supposedly going to be required in China and India by air-quality regulations. Six years later, apparently no such regulations have come out, and that company is four years gone. Another customer, which has a long-established market presence in very simple electronic ignition boards for chainsaw-sized engines, independently developed a similar ECM for 50-150cc motorbike engines (without special tax breaks), then put it on hold three years ago; it might get into production this year.

    The second was going to manufacture battery packs for cars. It folded. Another company took over the plant. It's still not producing anything but prototypes. That's six years and tens of millions of dollars expended, with no income except subsidies and tax breaks.

    And the biggest loss to businesses isn't the money thrown down rat-holes like this. It's that everyone learns they need their own lobbyist to try to stay competitive by chasing tax breaks and subsidies.

  • Northern Eye

    I am curious what they are counting as "subsidies". I have lived here for 35+ years and am quite familiar with industry here, and I can't think of a single thing that Teck receives from the State of Alaska.....

  • donald

    property tax is a huge revenue source, specifically in states without an income tax. If company A wants to build a 500,000sf building with 500 employees on two shifts each in some town on a vacant lot, the tax money being generated currently is next to zero on unimproved land. The town says hey, we'll let you come in here and won't jack up your valuation for 20 years. Tax revenue for that parcel does not go up. But there's either 1000 new jobs created in that town for their citizens, or some combination of new residents coming in and buying homes, paying more property tax, sales, tax, etc. Is this a handout cut from the same cloth as welfare? not really. Where it gets interesting is does company A put more money into the local economy and by the sticky hands of the government (sales tax on the employees, property tax on the new or bigger homes by the new or higher paid employees, etc.) or receive more services. more police protection, more fire, roads, etc.

    As coyote has point out in the past though, if every town would just not play the game, then the company would probably distribute themselves in the best tax friendly area and geographic location for materials and distribution for their purposes. TN is sucking a lot of business away from California just because of the tax and regulatory burden. it's localized for distribution networks. cost of living for the employees is better.
    IMO cities would do better to improve their schools, increase the friendliness of all business regulatory and tax burden and there would be ample companies looking to locate there out of the horrible liberal cities they helped build 20 or 75 years ago that consistently offer bad schools, high taxes and no relief from regulatory burden as the hip local downtown areas don't want that kind of business or manufacturing in their cool downtown anymore. they reap what they sow.

  • lzucco

    What this is getting at is how we help corporations get richer through subsidies. Do any of these companies really need government help? Not at all. Yet we continue to increase the deficit so these corporations can get richer. There's a serious problem with this picture. It really doesn't matter the amount of money provided to them - it's the fact that the government gives it to them at all. Not to mention that the politicians are giving it to them because they received money toward their campaigns or political parties.